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The bedrock of warehouse productivity- IMPROVING WAREHOUSE INVENTORY ACCURACY [updated]

Written by Michael Badwi
Created: 10 September 2015

IMPROVING WAREHOUSE INVENTORY ACCURACYInventory inaccuracy is one of the most important things for any warehouse. If left unchecked, inventory inaccuracy can lead to a negative cycle of declining productivity and increasingly poor data. 

Walking through a warehouse, I noticed stickers on the products and I asked what they were for. The response was that “these were used for stock take”,  While this isn't a completely foreign concept to me, it made me think which led to the following discussion:

MB: “Does your WMS not have a strong count capability?”
Ops Manager: “Well it does, but we think our manual process is quicker, faster and more accurate”
MB: “ok, are you able to tell me what your inventory accuracy and percentage of orders filled in full on time are?”
Ops Manager: “Not exactly, but as long as meet our revenue targets then we are doing a great job and I am meeting my KPIs!”

In another facility we visited the bulk locations were tracked as a single location in their “system”. The process of counting and monitoring inventory involved a complex procedure of taking infrequently (i.e. they were updated when there was time) updated count sheets and entering them into excel. Problem here was that facility was continually working (processing around 850 orders per day) so they stood no chance of maintaining any real time level of accuracy. To further compound their challenges the products in the facility had quite strict expiry dates and were reasonably high value items.

This resulted in annual inventory write downs of in expired stock of +/- R3,000,000!!

Inventory inaccuracy is one of the most important things for any warehouse. 

If left unchecked, inventory inaccuracy can lead to a negative cycle of declining productivity and increasing inaccuracies.Inventory accuracy in your supply chain

Left to itself, inventory inaccuracy erodes profitability and efficiency in the following ways:

  • Poor customer service - wrong products shipped to customers, orders not delivered in full or deliveries on dates that are outside the promised dates.
  • Increase in backorders because there is a perception that there is plenty of stock
  • Lost productivity when operators run around looking for missing products
  • High product obsolescence when the missing products are "found" but too late to be of any use
  • Direct hit to profitability when there is an inventory write off
 

Do you have a strong Inventory Control Program?

High inventory levels because you need the extra safety stock to hide the inaccuracies

Inefficient warehouse usage when you need to stop warehouse operations to carry a physical count in order to satisfy auditing requirements


 The following steps can assist in improving accuracy:

  1. Development of a Solid Counting /Inventory Control Policy is a must for every warehouse.
  2. Train Warehouse Personnel to follow documented procedures when exceptions occur in the Warehouse
  3. Find and fix root causes when exceptions occur in the warehouse
  4. Storage Policy of items in your warehouse also impacts accuracy

1. Development of a Solid Counting /Inventory Control Policy is a must for every warehouse.

Cycle counting a great way to gradually improve inventory accuracy. While eliminating yearly physical count is a great goal, it can only be achieved when the warehouse has reached a certain threshold of inventory accuracy. A key point here is to determine which items need to be counted more frequently and build your plan that procedures around that.

2. Train Warehouse Personnel to follow documented procedures when exceptions occur in the Warehouse

The warehouse workers should be familiar with the procedure when an exception occurs e.g. if a product is not found as suggested by the system or damaged, the operator should know how to log exception and follow the steps.

3. Find and fix root causes when exceptions occur in the warehouse

Analyse exceptions and found out why these exceptions are occurring. Are more exceptions being recorded for certain items or certain employees? Why? If a shipment of wrong product was detected, where did that pick come from and was the inventory corrected for the original item? Was wrong putaway the cause for a pick exception?

4. Storage Policy of items in your warehouse also impacts accuracy

To potentially avoid picking the wrong items, make sure that items similar in appearance are stored apart from each other. Having multiple items in the same location is also a recipe for shipping inaccuracy. You should also ensure that locations are properly labeled and physically
distinguishable.

Does your warehouse management system have strong count capability?

Checks in warehouse processes to ensure accuracy

Although this can initially seem time consuming checks such as counting each item at receiving from “problem” suppliers, weighing on outbound, full outbound QA on each pick or if you have a WMS SKU, location and quantity validation will prove to be life savers in the long run.

Check Digits is another way to improve data entry accuracy

Once again if you have a WMS I think check digits are really great! They force your operators to confirm the location that they are performing their work at as they don't know what the validation ID is until they are physically at the location.

Measure & Monitor is a must

Setting baseline, achievable metrics helps everyone understand the end goal.

 


Measuring your warehouse efficiency and productivity is crucial to achieving your business goals. Here’s how you can make sure you’re measuring the metrics that matter. Read our article on what to measure in your warehouse and discover the key KPIs for your warehouse.


 

Have you ever wondered how valuable a warehouse management system really is? What kind of benefit would you expect to get... Find out how Tarsus distribution improved warehouse efficiency by 60% using Manhattan SCALE.

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